IRPF on rental income from housing: how much do you pay to rent out your apartment?

You have an empty property and want to make it profitable. You consider renting it out to receive a recurring monthly income and place an ad. The first interested tenants start calling, but tax questions arise: what are the IRPF implications for renting a property? How is it declared? In this article, we answer your questions so you can understand it clearly and rent out your property safely.

Do I have to declare rental income on the IRPF?

The answer is yes, you must declare the money you receive from renting in your income tax return. If you do not declare what you are earning, you may be fined, and the Tax Agency can easily detect it if there is a signed contract, the tenant declares it, or the rent payment is made by transfer or another method that leaves a record of the payment.

What information do I need to include in my tax return to declare rental income?

In your income tax return, you must include important information about the rental, such as the following:

1. – Identification of the rented property (full address, city, etc.).

1. – Details of the rental contract: duration, tenants, and other information. The tenant must be identified with their full name and tax identification number (NIF).

1. – Income you have received from the rental without deducting any expenses that may be deductible.

What deductions can I apply in my income tax return in relation to renting?

Several deductions can be applied, some at the state level and others at the regional level. Among the most important deductions, we can highlight the following.

1. º The interest you pay on the property’s mortgage.

1. º Expenses due to repairs and maintenance of the apartment. For example, the cost of repairing an appliance.

1. º Taxes. This may include the Property Tax (IBI), waste collection fees, or other levies you pay as the property owner.

1. º Community fees. These are related to the building where the property is located and refer to common elements and services such as stairways, elevators, or concierge services. Both ordinary and extraordinary expenses (special assessments) can be included.

1. º Unpaid rent. If six months have passed without collecting the rent or if the tenant has filed for bankruptcy, you can include the amounts owed in your tax return as doubtful debts.

1. º Depreciation of the property. You can deduct 3% of the acquisition value or the cadastral value of the property.

1. º Depreciation of household goods (for example, appliances and furniture in the apartment). You can depreciate 10%.

1. º Insurance. You can deduct insurance policies such as multi-risk home insurance, fire insurance, and even rental default insurance if you pay for it as the landlord.

1. º Utilities. You can deduct utilities such as water, gas, electricity, or internet, provided you pay them. In some cases, these utilities are under the tenant’s name, in which case you cannot deduct them.

1. º Contract formalization expenses. In this section, you can include the fees of the real estate agency that helped you rent out the property or the lawyer who advised you during the negotiation and signing process. If there were legal defense expenses in court (lawyer and solicitor fees), these could also be deducted.

Reductions you can apply in the IRPF for specific cases

Is your property in a high-demand area? Have you rented to young people under 35 years old? Is the rental for a primary residence? In these cases and others, you can apply reductions in the IRPF on rental income from housing. We detail them below:

1. – 90% reduction if the property is in a high-demand area and you set a rent that is 5% lower than the previous contract.

1. – 70% reduction if the tenants are young people between 18 and 35 years old.

1. – 60% reduction if a renovation has been carried out in the previous two years.

1. – 50% reduction if it is a rental of a primary residence.

What portion of the rental income goes to the Tax Agency?

It will depend on the amount you receive from the rent. The following brackets have been set:

1. – Up to €12,450: 19%
2. – From €12,450 to €20,200: 24%
3. – From €20,200 to €35,200: 30%
4. – From €35,200 to €60,000: 37%
5. – From €60,000 to €300,000: 45%
6. – Over €300,000: 47%

These are the brackets set for the 2024-2025 tax year, which may vary in subsequent years, so it is important to check with your tax advisor to know exactly how much you will have to pay.

Frequently Asked Questions about IRPF on Rental Income

We have seen the main issues related to the income tax return, but in practice, situations arise that generate doubts. Let’s look at the most common ones:

Can I continue deducting the purchase of the property?

If until now you have been able to apply the deduction for investment in a primary residence, you can do so for the period during which the house was effectively your primary residence. If it ceases to be so, you will not be able to apply the deduction. If the rental is signed during the year, there will be months you can deduct and others you cannot.

And what if I don’t declare the rental income?

If you are receiving rental income and do not declare it, the Tax Agency could conduct an inspection and penalize you. Remember that it is income you must always declare to avoid penalties, and the Tax Agency has many ways to find out what is happening.

What if I am a usufructuary?

If, instead of being the full owner, you are the usufructuary of the property, meaning you have the right to receive the fruits (the rent), you will have to declare the rental income you receive in your tax return.

What should I do if I am engaged in renting properties?

If your professional activity consists of renting properties, you must declare the income in your tax return as earnings from economic activities, if you have an employee with a full-time employment contract to carry out the activity.

What if I rent the property as a tourist apartment, how do I declare it?

This is a different case because it is no longer a residential rental, but a rental for a use other than housing. If you offer a series of additional services in the tourist apartment, you must declare the income you receive as earnings from economic activities, because these are services typically offered in hotels. For example:

1. – Reception and continuous customer service in a space designated for this purpose.
2. – Periodic cleaning of the property.
3. – Regular changing of bed linens and towels.
4. – Providing the guest with services such as laundry or luggage storage.
5. – Catering services.

As we have seen, it is important to understand the implications of IRPF on rental income and the need to declare the income you receive if you rent out a property to avoid problems with the Tax Agency. If you need help renting out your property, contact our team of experts who can advise you and help you find the best option.